Predictions of Industry Mergers --DeWese

This will be a two-part column. Part one will be my blockbuster predictions for the future of the printing industry. Part two will be invaluable education for print salespeople and company owners.

I am truly blessed with healthy modesty. Occasionally, however (never more than once a day), I go on to the Internet to the Google search engine and type in "harris dewese." Up jumps about four pages of references to me—vitally important stuff that I've written, enormously significant stuff I've said, and places where I'm scheduled to appear where I will say even more valuable stuff.

Sometimes, my wife of 41 years, Anne "The Crusher", will sneak in my home office, peer over my shoulder and say, "You idiot! Stop wasting time reading about yourself and get in the kitchen and cook my supper."

Or, one of my so-called buddies, Dave "Mister Perfect" Jurist, or Ronnie "The Critic" Bray, or Mark "Attila the Editor" Michelson will call and, when I answer in my mellifluous baritone with a mellow "Hello," somehow guess my Google Euphoria. They'll say something like, "DeWese, you dimwit, you fake; you're reading Google again! Why don't you do something productive like getting some exercise and going on a diet?"

Hah! My three fair-weather pals and my mean-spirited wife, "Omnipotent Anne", don't have even a whole page among them in Google. I know. I looked them up.

Look in the Crystal Ball

OK, here are some printing industry predictions that will most certainly appear as links on Google. I am revealing them in this column first to benefit you faithful readers. Actually, I've been asked to make these predictions in a "keynote" speech on the last day of the On-Demand

Conference at the Javits Center in New York. The last day is when everyone is packing to go home and there might not be much of an audience, so I'll give it to you first.

Certain segments of the printing industry, principally the largest—the general commercial segment, have too much press capacity (i.e., supply). Underutilized capacity is press and other equipment time that exceeds the present demand. Whenever supply exceeds demand, prices go down, profit margins shrink, employees are laid off, companies default on debt payments, companies go out of business and some excess capacity is removed from the market. I'm not sure where all of that equipment is going.

Some of it sits idle, covered with tarps in quiet plants. Some of it must wind up in some big repo warehouse and some gets sold at discounted "forced liquidation" or "auction" prices.

When these conditions exist, print buyers are in command and can be very demanding. Now, if and when, demand begins to approach supply, you have a condition called "equilibrium." Equilibrium is good.

Some printing segments are closer to equilibrium than others. We hear so much about cutthroat pricing in the huge general commercial segment because it's much larger than all other segments in terms of revenues and number of companies. Many printers in highly specialized niches, within various segments like packaging, direct mail, digital printing, publications and labels, have grown revenues and profits despite our stagnant economy, low advertising expenditures and the aftermath of 9/11.

My prediction is that the general commercial segment will continue to lose 2,000 to 3,000 firms per year through the year 2006. Many of the other segments, with far fewer companies, will remain stable and some will experience growth at rates commensurate with the rate of growth of the markets they serve.

As an example, I have a friend who prints tickets for the NFL, NBA, MLB and NCAA sports events. He has a handful of smaller competitors. He has to print and number tickets for every seat, in every stadium, for every event. If the NFL or MLB adds teams, however, he will experience some growth. If professional or college soccer catches on (ugh), my pal is in fat city.

So, by 2006, we will have fewer than 30,000 printing companies in America. That's down from about 50,000 in the late '80s.

I predict that by year-end 2006, commercial printing profit margins will have improved 20 percent to 30 percent as measured by the PIA ratio studies. Now, along the way in the commercial printing segment between now and December 31, 2006, we will see even bigger blockbuster deals like Moore's recent acquisition of Wallace.

A big chunk of Wallace was the old Graphic Industries, a 1980s rollup of about 24 companies. Moore wants to diversify into commercial printing due to the shrinking forms market. It had already acquired Nielsen Lithographing (about $90 million) and now it has another $400 million. It already had about $200 million in commercial work that its salespeople stumbled on while selling forms, labels and direct mail. Now, Moore does as much commercial printing (at about $700 million) as Consolidated Graphics.

I predict that Moore will acquire Consolidated Graphics within the next 36 months. I also predict Quebecor will counter and acquire Mail-Well by year-end 2006. The Mail-Well deal will feature a bidding battle with the two Canadian giants, Quebecor and GTC Transcontinental, going head to head. Standard Register will acquire Banta and R.R. Donnelley will acquire Bowne. Somewhere in here, Deluxe Check will get into the fray and acquire some big player in a major diversification, and somebody will buy Cadmus.

Finally, I predict that survival and prosperity for companies in the future will depend on your ability to out-manage your competitors with a COMPLETE set of management skills, as well as your ability to outsell your competition with aggressive problem-solving and relationship selling techniques and with "lean" low-cost producer manufacturing practices.

Next topic.

Stu Schwartzberg, vice president, Eastern region sales for Von Hoffmann Corp.—a huge book and catalog printer—sent me a sales "Code of Ethics" that he cut from an article many years ago. Stu, although he looks younger, must be as old as dirt. I think he keeps this now-yellow, fragile clipping in his bulging wallet. His wallet reminds me of George Costanza from "Seinfeld" whose wallet contained about 300 scraps of paper and business cards.

Here is Stu's antiquated Code of Ethics. I'll state the ethic and then comment.

Keep promises to customers. Oh come on! They never remember all of your promises. How are you supposed to get the job?

Return calls to customers in an expedient manner. Now, really? Did those inconsiderate slobs return all the voice mail messages you left for them? Let 'em sweat a little.

Treat your customers with respect, courtesy and professionalism at all times. You will have to fake it. Try blatant flattery. Most print buyers get so little respect and so few compliments that they will buy anything.

Remain aware and evaluate customer satisfaction regularly. We're talking about print sales here. We don't have time to be alert. And who cares what the customers think?

Search for customer-related improvements. What did I say above? Print salespeople have enough to do with searching for the estimators and CSRs without searching for customer improvements. Let 'em solve their own problems.

Deliver service and products quickly and efficiently. What are you talkin' about? We're not talking about fast food. We're talking about printing. You can't predict when a printing job will be completed and delivered.

Here's one more.

Engage in any training or education that will enhance your job performance and commitment to customer care. Training and education are a waste of time and it costs too much.

Better yet, spend your time watching reality TV or planning your vacations.

Well, before you all sit down to write me hate letters, why don't you reconsider and get out there and sell something?

—Harris DeWese

About the Author

Harris DeWese is the author of Now Get Out There and Sell Something!, published by Nonpareil Books. He is a principal at Compass Capital Partners and is an author of the annual "Compass Report," the definitive source of information regarding printing industry M&A activity. DeWese specializes in investment banking, mergers and acquisitions, sales, marketing, planning and management services to printing companies. He can be reached via e-mail at hmdewese@aol.com.